Dean karlan chicago booth

This noise emerges primarily through the explanatory power of the underlying credit report data e. Estimating a structural model of lending with heterogeneity in information, we quantify the gains from addressing these information disparities for the US mortgage market. We find that equalizing the precision of credit scores can reduce disparities in approval rates and in credit misallocation for disadvantaged groups by approximately half.

Abstract: We characterize optimal oversight of algorithms in a world where an agent designs a complex prediction function but a principal is limited in the amount of information she can learn about the prediction function.

We show that limiting agents to prediction functions that are simple enough to be fully transparent is inefficient as long as the bias induced by misalignment between principal's and agent's preferences is small relative to the uncertainty about the true state of the world.

Ex-post algorithmic audits can improve welfare, but the gains depend on the design of the audit tools. Tools that focus on minimizing overall information loss, the focus of many post-hoc explainer tools, will generally be inefficient since they focus on explaining the average behavior of the prediction function rather than sources of mis-prediction, which matter for welfare-relevant outcomes.

Targeted tools that focus on the source of incentive misalignment, e. We provide empirical support for our theoretical findings using an application in consumer lending.

Abstract: Over 30m US adults do not use formal consumer credit. How many of these are inefficiently excluded because they lack a credit history or have a poor credit score? We also characterize how changes to credit report data could improve second-best efficiency subject to constraints imposed by adverse selection, or the correlation between unobserved credit risk and credit demand, among US consumers. In developing countries, small-scale entrepreneurs rely on daily or weekly loans for working capital.

In both cases, borrowers pay exorbitant interest rates and, often, additional fees to extend a loan over and over. Interest payments can quickly add up to more than the loan amount.

They conducted a series of experiments with indebted entrepreneurs in India and the Philippines and find that having their short-term loans paid off took the participants out of debt only temporarily. The entrepreneurs in question quickly took out new, profit-sapping loans.

In these experiments, completed in and , the researchers provided brief financial training to market vendors who had high-interest debt. The Indian entrepreneurs were paying average monthly rates of percent, while the Philippine borrowers averaged 13 percent in monthly interest costs, according to the study. Imprecise and subjective grading was on the list.

There is no way he could have achieved everything he has if it were true, however. With a caveat, Gandhi added: Thaler works only on things that interest Thaler. Now a practice professor in the operations, information, and decisions department at the Wharton School, Massey is working with an NFL team on what has come to be known as people analytics.

When a scandal involving the system arose in , Thaler contacted Cronqvist, now chair of the department of finance at the University of Miami. As in the work he did with Massey on the NFL draft, he will stick with something for years until he resolves it in his own mind. The man leaning casually against the lectern is his own toughest critic and does not grade himself on any curve.

It is hard to imagine two more different individuals, two more different teachers, or two more different economists than Thaler, Charles R. Even post-Nobel, there is still some skepticism from the quant side of the house.

Fama, the father of much of the efficient-market hypothesis, is known for exactitude, and for not suffering fools well, if at all. Professor Fama does not lean nonchalantly on the podium and tell stories. On his exams, there is most definitely a right answer and a wrong one. When Thaler did arrive in , Miller was asked why he had not blocked the appointment. The seemingly unlikely relationship between Thaler and Fama—good friends and golf partners, and yet diametrically opposed in so many ways—encapsulates the appeal of Booth to so many students.

Dickson mentions how Thaler likens the debate between behavioral economists and efficient-market economists to a face-off between Homer Simpson and Mr. Spock from Star Trek. Spock sits Homer Simpson, a human being. In my business, any Spock can see when a stock is cheap or expensive. But what can I find that proves that the market is acting like Homer? The value-added is the application of these tenets of behavioral finance. When Giovinazzo arranged his PhD committee, he sought out the best group, regardless of any supposed differences.

Fama and Thaler sat on his committee. They might disagree on how far you can extend the facts, but if the analysis is done in a sensible way, they will be in sync on it. Thaler provokes debate with and among his students, both in class and out. As part of that show, Thaler presents a bunch of questions people typically get wrong, predicts the incorrect answers most students will give, and then reveals the right answer. The point is to show them they are not as smart as they think they are.

I can predict the mistakes they are going to make. The Chicago Approach, both men agree, is to have fierce arguments in workshops but never make them personal, to debate principles and ideas rather than personalities and egos. It is not just intellectually stimulating and distinctly different from any other business school; it shows a generosity of intellect uncommon in any workplace.

Fifty slides recognized more than people who have helped him in his work. The slides were his idea and he was very insistent on their inclusion, according to Gandhi. The people who helped him—he gives it back. It is the coolest, most surprising side to him. And it makes for lifelong fans. Each influences and reinforces the others, and sometimes they dovetail.

In , it spun off into a social purpose company co-owned by the government, an innovation charity, and the employees. BIT continues to work on public policy, including ways for the country to save money. Karlan cofounded stickK. On a much larger, more life-altering scale, Innovations for Poverty Action, which Karlan also founded, uses both traditional and behavioral economics in randomized trials to try to find solutions to global poverty. He shifted my personal research agenda by a lot.

A good chunk of my papers started with ideas he put forward. How can I think about changing a policy? His ideas have changed how professional sports teams think about their rosters and drafts, as well as how the UK government collects fees and fines.

In addition to the academic essays he wrote in his popular Anomalies series in the Journal of Economic Perspectives from to , he educates the general public with a recurring column in the New York Times , contributions to several blogs, and a Twitter account with more than , followers.

His legacy is not something he thinks about when he teaches. He does think about leaving a memory trace. He works on issues for low-income households in both developing countries and the United States. Jameel Poverty Action Lab. As a social entrepreneur, he is co-founder of stickK. Sloan Foundation Fellowship, and a Guggenheim Fellowship. Karlan received a Ph. Search form Search.